by SUSAN MANN
Competition among Canadian grocery retailers is so fierce they have been unable to pass on all of their increased costs for meat and produce to consumers during the first quarter of this year and have had to cut prices on packed goods, according to a new George Morris Centre study.
Kevin Grier, George Morris Centre senior market analyst and author of the study, Competition Leads to Food Price Deflation, says “to me the interesting thing was the fact that prices (for packaged goods) are declining” and the year over year decline is a relatively new occurrence.
“The year over year quarterly decline in packaged goods pricing as reported by StatsCan (Statistics Canada) started in the third quarter of 2013,” the study says.
With that noted, the order of magnitude of the decline has been steadily widening.”
The study notes that 2014 first quarter Consumer Price Index data shows that the price increase in food store purchases is lagging behind the overall inflation rate, which increased in this year’s first quarter by 1.4 per cent compared to the first quarter of 2013. But the price of food purchased from stores increased by 1.3 per cent in this year’s first quarter compared to last year’s first quarter, while restaurant prices increased by 1.1 per cent for the same time period.
First quarter food price increases were driven largely by fresh meat and produce, the study says. Fresh fruit and vegetables increased by four to six per cent in the first quarter of this year compared to 2013 and meat increased by slightly more than two per cent. “The price increases in those items would have been driven by supply challenges mostly and by the immediate cost impact of the depreciated Canadian dollar,” according to the study.
“What is, perhaps most interesting is the fact that it is only the fresh commodity-based items that are driving pricing,” the study says. “The other board-based categories, surprisingly including eggs and dairy, are showing year over year declines. Looking deeper into the packaged goods pricing reveals that grocers have been enduring pricing deflation in 2014.”
Grocers’ meat product costs increased by about four per cent in the last quarter of 2013 compared to the last quarter of 2012 and grocers would have been trying to pass those increases along in the first quarter of this year but only succeeded in getting a two per cent increase in meat prices, the study says.
For produce, grocers’ last quarter of 2013 costs increased by 12 to 14 per cent compared to the last quarter of 2012 but like meat they have been unable to pass all of the increase along and only succeeded in increasing produce prices by four to six per cent in the first quarter of this year, the study says. “Grocers have not been able to pass along all of the 2013 fourth quarter costs increases for meat and produce as of the first quarter of 2014.”
Grocers will be trying to force produce and meat pricing higher in the second and third quarters of this year “in order to recoup the increases,” the study says.
Grier says he doesn’t know if grocers will be successful in recovering all of their increased costs from the last quarter of 2013 during this year. “That would be the idea, but the limiting factor again becomes competition and what they (the grocers) will be able to achieve.”
The big story is “the competition among grocers is doing this,” he adds, noting competition is causing the deflation of the consumer packaged goods and it will be the determining factor in whether grocery retailers be able to recoup their cost increases.
Weighing in on the grocers’ decisions to consider putting prices up this year is whether they consider the factors contributing to their higher costs to be long term. “They might not want to raise vegetable prices, for example, if they think they’re going to go back down again. They prefer stability as opposed to going up and down.”
On the meat side, “they probably are resigned to the fact that these prices are going to be long term increases,” he adds. BF
Comments
Time for the chicken farmers to allot more quota charge some more but still cheaper than red meat
They prefer stability as opposed to going up and down.
Excatly what bankers are looking for also!
Surprisingly Dairy and eggs have declined year over year . I guess that is the reason we have no SM bashing on this story .
What is it about fierce competition among grocery store chains, and the price-reducing effect of that competition, do the lesser-intelligent souls who support supply management not understand?
In addition, why can't supply managed farmers recognize the difficulty retailers are in, and reduce their own prices accordingly?
Furthermore, why can't supply managed farmers recoginze that the only break consumers are getting on dairy and poultry products comes, not from greedy dary and poultry farmers, but from fierce competition at the retail level?
AAAARRRGGGGGHHHHHHHHH!!!!!!!!!!!!!!!!!!
Stephen Thompson, Clinton ON
I just was wondering where the bashers were on this story and thought I would post a response to see if I could spaark you up again .
Guess it worked !
But would you please stop painting every one other than your anti cronies as SM supporters . Some times those of us who are not SM supporters get sick of your immature comments that paint every one as anti or for . Some of us are good OFA members and can't decide what side of the fence we should be on and now have a post impaled in well you know where !
It's like this - A "good" OFA member has no trouble understanding that supply management screws consumers and is a financial bully in the farm community.
A "bad" OFA member is quite content to let some farmers be legally able to bully others, and does nothing about it - that makes you a "bad" OFA member, and the immature party in this discussion.
Stephen Thompson, Clinton ON
Editor: Comment will be posted if resubmitted and signed.
Sometimes it takes the bashers a little while to find a way to connect a story to the evils of SM. Maybe they just need more time or maybe your comment will do the trick!
The above story has made it clear that their is fierce competition at the retail level, contrary to what the anonymous posters have claimed on this site. Raube Beuerman
A bit of a difference between this article and one the CBC did yesterday.According to StatsCan retail prices of grilling steaks and ground beef are up between 11 and 12% in the past 12 months,Pork prices are even higher at 16% since April 2013,hot dog wieners are a bit more stable rising only 5%.Appearently some grocery stores have been able to pass on costs very well.
Statscan warns of higher prices to come with no relief in the near future.
If you are looking for alternatives,chicken has actually declined 0.5% in the last year,StatsCan data shows.
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